Philadelphia Limits the Use of Credit History in Hiring Decisions

philadelphia credit checks

As part of its Fair Practices Ordinance, Protections Against Unlawful Discrimination, Philadelphia has enacted a measure that limits employers’ use of credit history in making employment decisions about applicants or employees. The law is effective as of July 7, 2016.

We are used to hearing about jurisdictions adopting a Ban the Box law to restrict the use of criminal background checks in employment decisions. But the Philadelphia law is an example of another kind of restriction on the use of consumer reports that is also gaining ground around the country. It makes it discriminatory to procure or use “any written, oral, or other communication of information” about an individual’s credit history in taking adverse action. Credit history is defined broadly to include general credit use and scores, as well as potential legal actions such as bankruptcy, liens, or collection activities.

When laws restrict an employers’ ability to use background history reports in employment decisions, they also increase the employers’ exposure to risk. The risks in question vary with the type of restriction. For Ban the Box, the potential of hiring an employee who is prone to committing a criminal act is changed. For laws restricting the use of credit reports, the employers’ risk of hiring or retaining someone who may perpetrate financial fraud is changed.

In an attempt to address this risk, the Philadelphia law defines a number of exemptions where legal or financial risk is inherent in the role in question. It does not apply to financial institutions or other jobs with significant financial responsibility (not including retail transactions). Jobs that involve information about the organization that is valuable or financial may be excluded, and employees who are required by law to be bonded are exempt.

Employers will have to review and evaluate job roles to determine if they can be included in exempt categories. This is important because credit history can only be acquired and used in the employment decision for members of these categories. For other applicants or employees, credit history may not be used. If a role has access to financial or other valuable assets, or information about them, employers need to be able to describe the access to justify the use of credit history.

If credit history is used in making an employment decision, the hiring process should include the two-step adverse action policy proscribed by the Fair Credit Reporting Act (FCRA). Further, just as with Ban the Box, employers should take the time to ensure that adverse actions are based on job related criteria that takes individual circumstances into account.

Laws are increasingly focused on discrimination in hiring. While employers have every right to use credit reports in making employment decisions, they have to be aware of the growing number of legal restrictions designed to protect individuals.

About Michael Gaul

A security industry professional since 1988, Michael has extensive expertise in the fields of human capital risk management, physical security, and background screening process management. Michael leads Proforma’s sales, marketing, and strategic customer relations efforts.


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